January 2024: Recent Developments in the Realm of Bankruptcy and Restructuring
In an effort to keep you apprised of what’s happening in the realm of bankruptcy and restructuring, here are six legal and statutory developments from the month of January, 2024.
1. Commercial Chapter 11 bankruptcy filings surged in 2023 compared to the year prior. Chapter 11 filings increased 72% to 6,569 in 2023 from the previous year’s total of 3,819, according to data from Epiq Bankruptcy.
2. Bankruptcy filings by PE- and VC-backed companies in 2023 set records, according to S&P Global Market Intelligence data, climbing 174% from 2022. Healthcare and consumer goods portfolio companies led the way in terms of sector concentration.
3. There was also a big increase in repeat Chapter 11 bankruptcy filers—so-called “Chapter 22s.” The most Chapter 22 cases were filed since 2020 during the Covid-19 pandemic.
4. The cryptocurrency industry continues to be a boon for many bankruptcy lawyers. News outlets have recently reported on the hundreds of millions in legal fees generated in large crypto cases filed in the last couple of years, such as FTX. Add Terraform Labs to the mix, which filed for bankruptcy on January 21, listing liabilities ranging from $100 million to $500 million.
5. Airlines are among the most “frequent fliers” through the U.S. bankruptcy system. And recent reports suggest that two airlines, Spirit and Brazil’s Gol, may be on the brink. Following the U.S. government blocking Spirit’s merger with JetBlue, TD Cowen Aviation Analyst Helane Becker wrote: “We believe Spirit is likely to look for another buyer … but a more likely scenario is a Chapter 11 filing, followed by a liquidation.”
6. Having been heavily involved in two Michigan marijuana company receiverships over the past year (as counsel to the receiver), we expect to see more receivership cases in this space, given the financial/operational challenges faced by many in the industry, and the fact that such companies won’t have widespread access to U.S. bankruptcy courts unless and until marijuana’s status as an illegal Schedule 1 controlled substance under federal law changes.